Investors Looking for Growth Markets Should Stay & Invest in Africa, Not Go Home
Recent times have been tough in Africa. The financial markets went gloomy months ago. Africa’s economic growth will fall to 1.4% this year, says the IMF. Growth was 5%+ from 2010 to 2014. GDP per capita will contract for first time in 22 years. Nigeria’s economy is shrinking. South Africa and Egypt, Africa’s other big two economies, are also stagnant or shrinking.
Private equity deals in Africa during the first half of 2016 were just $900 million, according to the African Private Equity and Venture Capital Association (AVCA). AVCA says that only 40% of the funds raised in 2015 have been invested. Carlyle, a leading PE fund, raised $698 million in 2014, but two years later most of the money has still not been invested. According to AVCA, currency risk is the biggest problem facing African private equity investors.
However, there is reason to be positive when considering an African investment. As far as agribusiness investment in Africa is concerned, the fundamentals have not changed. It’s all about fundamentals v. perceptions.
Africa’s population is still growing fast, societies are urbanizing, the middle class is growing, and today’s young people are better informed, better educated and they have high expectations. Demand for affordable, quality food products is outstripping supply.
A new survey of attitudes in South Africa, Nigeria and Kenya show that people are optimistic about the future. They do believe however that government only benefit small groups within society and does not look after the people in general. Other key issues are education, food shortages, energy, and corruption.
Extrusion is still a new technology in Africa, and people are amazed when they learn how versatile and simple it is. They are even more amazed when they learn that investing in an Insta-Pro extruder is about the same as purchasing a 4×4 vehicle or small truck. If you would like to learn more about investments in Africa, give us a call.